Startup Roundup: Extreme in India, First Angel presentation fees

In FP Tech Desk’s Startup Roundup series, we take a look at Canadian startup news from the past week.

Networking, pitching and celebrating

There was a lot going on in the startup community this week with several big events from a TechCrunch meetup in Toronto to the FounderFuel demo day in Montreal.

On Monday, TechCrunch came to town and hosted a meetup for entrepreneurs and the city’s tech community at the Steam Whistle brewery. By all accounts a good time.

Over at Sassafraz in Yorkville, the Canadian Film Centre Media Lab revealed the eight companies it picked for the first cohort of its ideaBOOST accelerator program for digital entertainment (think video-based entertainment, mobile games and apps).

Related

The ventures each get $15,000 in seed capital and will take part in an four-month development program aimed at prepping them for commercial launches. The initiative is backed by Corus Entertainment, Google Inc. and Shaw Media. You can check out the teams picked by a crowd-sourced voting process, rounded up in this blog post.

Staying in Toronto, on Wednesday evening PwC Canada held its Vision to Reality awards at the Drake Hotel, naming Toronto-based Wattpad its Innovator of the Year, another nod for the startup in what’s already been a big year.

Runners up for the award were Brossard, Que.-based Acquisio and Toronto-based Infusion.

Thursday was demo day for Montreal’s FounderFuel. Roger Chabra, partner with Rho Canada Ventures, tells me there were about 100 investors there in the crowd of 800 who showed up for the accelerator’s first demo day held in the evening. Check out the list of companies that pitched here.

In a flash back to sunnier days, I first came across Openera, the online filing solution company, at International Startup Fest in Montreal where it won the FounderFuel prize and was asked to join the accelerator. In an email exchange with CEO Peter Lalonde post-conference he told me the Ottawa-based startup had also been accepted to Toronto’s Extreme Startups and Mercury Launch in Ottawa. They had also been invited to the C100’s 48 Hours in the Valley, the Grow Conference in Vancouver and the Banff Venture Forum in Calgary. It will be interesting to see where this in-demand venture goes from here.

Extreme in India

In conjunction with Prime Minister Stephen Harper’s trade mission to India, Toronto’s Extreme Startups announced a partnership with The Hatch, an accelerator in Delhi, India this week. Sunil Sharma, managing director of Extreme, said three of their current companies — Shifthub, Picatic and Venio — will be heading to India later this year or in early January with a view to set up sales offices there.

“Normally, startups wait until they are in a much more mature state before considering distant markets such as India,” Mr. Sharma said. “The goal of this partnership between the Hatch and Extreme Startups is to get entrepreneurs thinking about these markets from the beginning and to make it very cost-effective and easy to engage complex markets.”

First Angel Network’s presentation fee

Earlier this week a tweet from StartupNorth generated some social media discussion about the practice of angel investor networks taking a fee from companies that pitch to them.

First Angel Network in Atlantic Canada taking a $3000 pitch fee and 8% of the transaction from startups. Embarrassing

I spoke with Ross Finlay, co-founder and director of the Halifax, N.S.-based First Angel Network to get his thoughts on the fee.

A bit of background about First Angel first: The group has invested about $9-million in 21 early-stage companies since it was formed in 2005. Out of that group, only one has failed and two have exited (one was sold for 1.5 times the network’s investment 18 months later and a second — Immunovaccine — went public on the TSX Venture Exchange and many of the investors still hold their shares in the company).

Mr. Finlay said the angel network has seen 500 companies since they started and does not charge them all fees to pitch their ideas. Rather, it selects one promising venture every quarter to focus on and that company is indeed charged a $3,000 fee to present to the entire First Angel Network (about 100 investors total) at a series of events throughout Atlantic Canada.

They’re typically given an hour to present their business and the company’s management team then spends the evening having dinner with the angels.

“Every company that has presented has been well funded … They’ve got the whole floor to themselves. So it’s a very rich experience from that perspective,” Mr. Finlay said. “The entrepreneur gets upwards of three hours with 100 angels.”

The fee has never been a secret, he said, and First Angel has presented their model to other angel investing groups.

“It covers a very small amount of the actual meeting costs,” he said. “I consider it more of a commitment than a contribution.”

As for the 8% transaction fee on the raise, Mr. Finlay said half of that is given back to the company for reinvestment. So First Angel takes 4% in equity and the other half of the fee is returned to the company in cash.

For example, he said, if First Angel raised $200,000 for an entrepreneur, it would give the company both an invoice for $16,000 and a cheque for $8,000.

“We are investing at probably the highest risk point for that company,” he said. “So this is just a small way to mitigate that risk.”

What are your thoughts on these issues? Is it too much to ask a company just starting out to come up with $3,000 to share their idea? Or is it justified in terms of the resources the angel network invests in connecting the company with investors for a much bigger payoff?